In the past few years, the Indian banking sector showed an increasing trend both in terms of number and quantum. In terms of the relative share of frauds, PSB’s NPA’s significantly exceeded their relative business share as per the regulator.

While a major share of frauds is in the form of internet banking related scams, unpaid loans or loan defaulters but financial year 2017-18 showed an increasing trend in all these. The quantum and share of PSU bank frauds were much higher than their credit and deposit share, at 65 and 75 percent respectively, as per the data released by RBI.

Fraud amount in PSB’s exceeded their relative share in the credit. It could be due to lax internal control mechanisms while issuing loans, due to which their NPA’s swole, the regulator commented.

A significant amount of deterioration in such assets in the PSB segment was due to:

In all, the regulator stressed that there was not much difference in operational risk oversight frameworks of public and private sector banks, the significant difference that realized in operational risk called for a good amount of introspection in the operational effectiveness of the SOP at state-run lenders.